Figuring The COOL Riddle

The debate continues on how to implement the mandatory country-of-origin labeling (COOL) law.

Clint Peck Senior Editor | Jun 01, 2003

When President Bush signed the latest farm bill last May, a tidal wave called country-of-origin labeling (COOL) swept across America. Today, the backwash from the COOL provision that amends the Agricultural Marketing Act of 1946 has left the U.S. beef industry mired in controversy, with most producers wondering how they will live in the aftermath of COOL.

The debate is not so much the law's intent as its implementation.

COOL requires any person or entity in the business of supplying a retailer a covered commodity (see sidebar) to provide its country of origin. At the same time, the law prohibits USDA from establishing a mandatory livestock identification (ID) system.

Bill Hawks, USDA under-secretary for marketing and regulatory programs, says COOL is one of the most prescriptive laws on the books.

“This legislation is very clear,” Hawks says. “Covered commodities must be labeled as to country of origin unless they are an ingredient in a processed food item.”

Unlike any other retail labeling law, the burden of proving the source of a covered commodity ultimately rests with the retailer.

The language doesn't specify what's acceptable to verify country of origin claims, explains Hawks. “It only says USDA may require persons in the distribution chain to maintain a verifiable recordkeeping audit trail to verify compliance.”

He says the law will create “a massive burden” on the industry due mostly to additional required recordkeeping. Even in the purest situation, where a calf is born, raised and slaughtered in the U.S., documentation will be needed at each stage of the animal's life and through processing and merchandising to prove country of origin, Hawks says.

“The entire production system must have appropriate recordkeeping in place,” he adds.

There's increasing concern that the burden will fall on U.S. ranchers, stockers and feeders to certify that cattle are born and raised in the U.S., says Bryan Dierlam, director of legislative affairs for the National Cattlemen's Beef Association (NCBA). He refers to recent packer letters to ranchers and feeders outlining requirements that will be placed on producers to verify country of origin.

“Clearly, these firms are reacting to the law in a manner that would reduce their liability by shifting it to producers,” Dierlam says. “The result of this law will be an additional burden on producers — but to what degree is yet to be determined.”

Dierlam says NCBA has long supported the concept of COOL as a way of increasing the value of U.S. beef, but only if it doesn't come at an undue cost to producers.

“It's our mission to protect the business climate of U.S. producers. As we go through the COOL rule-making process, we'll work to lessen its burden on producers and make promotion of U.S. product our number-one goal,” he says.

Easier Said Than Done

In a letter to producers, Bruce Bass, IBP (Tyson Foods) senior vice president for cattle procurement, outlined what his firm must do to meet COOL's documentation requirements of retailers. He then passed responsibility on to feeders and ranchers.

“It will be necessary for you to provide IBP with verifiable information on the place of birth and every location where livestock was raised for each animal marketed,” Bass wrote. “IBP Inc. will require you, as our suppliers, to provide us evidence of your recordkeeping program for gathering and maintaining this information.”

Bass says only producers can document and verify the law's “born-in, raised-in” components. These documentation costs, as well as independent, third-party, verification costs, will be producers' “responsibility,” he adds, and suggested producers raising market cattle for sale to a packer after Sept. 30, 2004 should immediately begin documentation on all their calves.

Ken Bull, Wichita, KS, vice president of cattle procurement for Excel Corporation, agrees that, ultimately, the information on where an animal was born and raised must come from livestock producers. But, COOL will definitely change how packers do business, as well, he says.

“We'll need to retool our plants and build systems to track every animal all the way through the system,” Bull says. “This is something that's nearly impossible in time to comply with the law though.”

The other option, at least for the time being, is for packers to separate animals into “batches” of like-origin animals and maintain the identity of those batches through slaughter, fabrication and distribution. He says 7-8% of cattle in the U.S. represent some degree of foreign or “mixed” origin.

“That means we'll have to schedule certain days for processing U.S. cattle and portions of days or weeks for harvesting the rest,” Bull says. “We're going to need to know the country of origin before we ever buy an animal and schedule it for a plant.”

If the identity of an animal is lost at any point, that animal will have to be scheduled for harvest and processing in a “batch” destined for food service, he says.

“This, of course, adds another level of batching on top of the batches segregated into U.S.- and mixed-origin cattle,” he adds. “This will all result in a logistical mess where mistakes will be made.”

Sufficient Documentation

Therefore, Excel buyers will be looking for suppliers who can guarantee information of origin. How to do that is a question Bull says needs to be fully addressed in the final COOL rules.

“Whatever comes of the rules, we'll need a permanent, easily readable ID system,” he adds. “A brand on a hide can't be audited after the animal is processed. Ear tags may be part of a record-keeping program, but I'm not sure they'll be sufficient alone.”

The consensus is that cow-calf herd records or papers simply listing a producer's name, address and information on where animals were born and raised are “self-certification.” USDA has indicated that self-certification of an animal's country of origin doesn't comply with the law.

“These packers have disseminated false and misleading information and have threatened U.S. producers with lower prices, inability to market livestock and packer-initiated audits,” he says. R-CALF has filed a formal complaint alleging the letters were in violation of the Packers and Stockyards Act by engaging the packers in unfair, unjustly discriminatory and deceptive practices.

R-CALF maintains that cattle aren't covered under COOL requirements; that “beef” is the bovine commodity of concern.

“By definition, COOL clearly doesn't include cattle as a covered commodity,” Bullard says. “Because cattle aren't a covered commodity, USDA has no statutory authority to impose a recordkeeping system for cattle.”

R-CALF's stand is that only upon cattle's “transformation” into a covered commodity do the people who then “prepare, store, handle and distribute the resulting covered commodity to retailers” become subject to the USDA's audit verification system.

“When COOL opponents finally surrender to the fact that the law will be implemented Sept. 30, 2004, only then will the industry be able to collectively concentrate on a low-cost, regulatory-efficient and least-burdensome system of implementation,” Miller says.

Then, COOL can begin returning market power to the U.S. producer, Bullard adds.

“How can we talk about U.S. producer competitiveness if people can't differentiate U.S. production from imported product?” he asks. “How can U.S. producers capitalize on the unique characteristics of domestic production if the consumer can't tell the difference between a domestic product and an imported product?”

Still, Bullard recommends producers keep birth records and purchase and sales receipts, as well as other records they feel will help provide a paper trail of their animals “just in case.”

Cutting The Mustard

Texas and Southwestern Cattle Raisers Association (TSCRA) president Bob McCan, Victoria, TX, says beef COOL is a worthy concept. However, TSCRA supports a voluntary rather than a mandatory program that carries burdensome regulations and undefined costs to the producer.

As a consumer information law, McCan believes COOL fails to cut the mustard.

“About 80% of foreign beef consumed in the U.S. is through food service or processed products,” explains McCan. “Since these two categories are exempt from COOL, consumers will seldom be able to actually identify and choose U.S. beef on a restaurant menu or in a processed product at the grocer.”

Additionally, McCan says, there's insufficient evidence to suggest consumers are willing to pay a premium for strictly U.S. beef, now or in the future.

“Therefore,” he says, “we are extremely reluctant to assume additional costs of a labeling system if there is a chance the benefits won't be sufficient to cover costs.”

The additional costs to the industry and the “unintended consequences” of COOL have everyone from seedstock producers to feeders frustrated, says Jim Peterson, a Judith Gap, MT, rancher and chair of NCBA's international markets committee.

“This law was hastily put together without regard to its impact on producers and the burden it places on the shoulders of feeders and ranchers,” he says. “If this law stands, the entire beef industry will to have to come together and resolve these issues so we can have a law we can live with.”

Frequently Asked Questions

At a minimum, cow-calf producers should maintain cow herd and calf birth records, sales records — including dates, animal number and description, and the names of all animal buyers, says Darrell Peel, Oklahoma State University livestock marketing specialist.

A: These are combinations of raw products that produce a materially different product, or a commodity that is altered by the addition of other ingredients or by further processing (e.g., cooking or curing) to produce a different product.

Q: How will beef products be labeled under COOL?

A: Whole-muscle beef products will be labeled in one of these general ways:

Product of USA — if the animal was born, raised and processed in the U.S.

Mixed Origin — (e.g., from animals born and raised in Mexico and processed in the USA or from animals born in Canada, raised and processed in the USA).

Imported — (e.g., product of Canada).

U.S. and mixed-origin products must provide detail with respect to production stages including where the animal was born, country or countries in which the animal was raised, and the country in which the animal was processed.

Imported product must be labeled at the point of importation regarding the country from which the product is imported. Imported product doesn't require information about production systems or other countries of production prior to importation.

Ground or commingled product must identify product as above for each source and must list each source in descending order of prominence.

Q: What are the retailer responsibilities?

A: Records must be maintained on all sales for two years. USDA may require a “verifiable recordkeeping audit trail” to ensure compliance. Retailers may be subject to a $10,000 fine per violation for willful violation of COOL.

Q: What are the supplier responsibilities?

A: Subtitle D states “Any person engaged in the business of supplying a covered commodity to a retailer shall provide information to the retailer regarding country of origin of the covered commodity.” Buyers may require third-party verification of recordkeeping.

Q: What is meant by “verifiable” recordkeeping audit trail?

A: Precise recordkeeping requirements are so far unclear. The Act specifically forbids USDA from mandating an animal ID system to meet COOL provisions. Current USDA guidelines indicate, though, that a product labeled as “Product of USA” must be traceable from birth to one or more U.S. producers. Currently, self-certification at any stage of production or processing isn't sufficient to verify country of origin.